A Closer Look At Apple’s Debt & Changing Capital Structure

Apple’s (NASDAQ: AAPL) capital structure has changed dramatically over the last few years, with its debt to equity ratio rising from 0.3x to 1.2x between 2014 and 2019 and its total debt growing from $35 billion in 2014 to $108 billion in 2019. The company has been taking on debt, partly to fund its share repurchases and dividends, which have together expanded from $47 billion in 2015 to $81 billion in 2019. However, Apple has gone slow on raising new debt over the last few years, as its debt load has declined from about $116 billion in 2017 to $108 billion, and we believe that debt could remain at current levels going forward. Below, we take a closer look at Apple’s debt and overall capital structure.

Apple’s total outlay for dividends and share repurchases has increased from $47 billion in 2015 to $81 billion in 2019.

While Apple has tapped into its cash holdings, which is largely held overseas, it has been taking on debt to a certain extent.

While Apple has been able to borrow at low interest rates, its average interest rates, which we calculate as interest paid divided by average debt, has trended steadily higher as benchmark rates have been increasing.

Apple’s Capital Structure has changed dramatically, with its Debt to equity ratio rising from 0.3x in 2014 to 1.2x in 2019

While Apple’s Debt has increased from $35 billion to $108 billion, its shareholder’ equity has declined from $112 billion to $90 billion, as the company has been reducing its cash position via its capital return program.

Apple’s Debt Coverage Metrics have deteriorated over the last few years although they remain very much manageable

Apple’s Interest coverage ratio, which we calculate as operating income divided by interest paid, has declined from 97x in 2015 to 18x in 2019.

Apple’s Total Debt to EBITDA ratio has increased from 0.8x to 1.4x over the same period.

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